04 NCAC 16F .0108. FINANCE SUBSIDIARY TRANSACTIONS WITH PARENT

(a)  A savings institution may provide the capital to establish one or more finance subsidiaries by transferring assets to one or more finance subsidiaries:  Provided, that:

(1)           The aggregate book value of all assets transferred or made available to finance subsidiaries shall not, without the prior written approval of the Commissioner of Banks upon a showing by the savings institution that adherence to the limit would work a hardship upon the savings institution and that granting of the excess would enhance the safe and sound operation of the savings institution, exceed 30 percent of the book value of the savings institution's total assets determined as of the date any assets are transferred or made available;

(2)           The aggregate current market value of assets transferred or made available shall not, without the prior written approval of the Commissioner of Banks upon a showing by the savings institution that adherence to the limit would work a hardship upon the savings institution and that granting of the excess would enhance the safe and sound operation of the savings institution, exceed the amount necessary and customary for the issuance of the type of securities to be issued by the subsidiary or 200 percent of the gross proceeds resulting from the offerings of securities by the finance subsidiary, whichever is less.

For the purpose of calculating the limitations set forth in Subparagraphs (1) and (2) of Paragraph (a) of this Rule, assets which are considered to be transferred or made available to a finance subsidiary include assets to capitalize the finance subsidiary, to collateralize a securities offering by an established finance subsidiary, to maintain collateral levels for any security issued by the finance subsidiary.  Assets also include the greater of the face amount of any guarantee issued by the parent with respect to the obligations of the finance subsidiary or the market value of any collateral for such guarantee.

(b)  Finance subsidiaries shall not be consolidated with their parent for the purposes of calculating the net worth of the savings institution.

(c)  A savings institution may guarantee any obligation issued to its finance subsidiaries; provided, that the face amount of the guarantee shall not exceed the unpaid principal balance of the obligation, and provided further, that the guarantee shall provide that the resources of the finance subsidiary issuing the obligation shall be exhausted before recourse shall be had to the guarantee.  Such guarantee shall not be considered to be an outstanding loan for purposes of loans-to-one-borrower limitations.  If such guarantee is collateralized, the greater of the face amount of the guarantee or the market value of the collateral shall be included in the total amount of assets that may be transferred by the parent subject to the limitation of Subparagraphs (1) and (2) of Paragraph (a) of this Rule.

(d)  Any funds constituting the capital of an off-shore finance subsidiary may be invested in liquid assets, or in the stock, bonds, debentures, notes, or other obligations (including deposit accounts) of an affiliate of the parent:  provided, that the earnings from such investments and the proceeds of any sale of such investments are remitted to the parent.

 

History Note:        Authority G.S. 54B-55; 54B-77; 54B-195; 54C-53; 54C-144; 54C-146;

Eff. October 1, 1984;

Temporary Amendment Eff. October 2, 1991 for a period of 180 days to expire on March 31, 1992;

Amended Eff. December 1, 2011; May 11, 1992.